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There are 60 major stock exchanges in the world. By itself, the New York Stock Exchange (NYSE) is bigger than the 50 smallest exchanges.
Many investors never even think about investing in the 50 smallest exchanges. This means they are missing out on the most exciting opportunities in the world.
Some of the smallest markets make great investments.
Some small stock exchanges offer more value than large markets. Saudi Arabia’s Saudi Stock Exchange is one of those undervalued opportunities.
A New Source of Funds
Investors often associate Saudi Arabia with oil, which isn’t surprising since it’s one of the world’s top oil producers by volume. The Kingdom churns out approximately 12.39 million barrels per day.
And, if they want to invest in oil, there are other opportunities that seem less risky. Perceived risks in Saudi Arabia include concerns the government could disrupt the economy.
In the past few weeks, that risk became real. The Saudi government arrested dozens of princes and key officials. Arrestees include some of the country’s richest citizens.
There’s not much news from the Kingdom, but speculation is that this action could turbocharge the economy. Experts believe this is basically a “shakedown” where the government grabs some of that wealth.
By the time this roundup is over, the government might take back about $800 billion in assets.
And the government could certainly use the money. The Kingdom relies on oil for its revenue. Declining oil prices hurt the country.
The detained princes control more than one year of economic output for the country. Those funds could replenish the country’s foreign reserves, which have fallen by a third in the past three years. That would allow the government to lower costs for average citizens by punishing just a few.
All this recent turmoil looks like a positive for the country. That means now could be the time to buy stocks in Saudi Arabia.
Playing Saudi Arabia’s Market
Investors in the U.S. can buy the iShares MSCI Saudi Arabia Capped ETF (NYSE: KSA) to access the country’s exchange. KSA is an Exchange-Traded Fund (ETF). It owns shares of companies that trade in Saudi Arabia. It’s the easiest way for U.S. investors to access the country.
The average stock in this ETF is trading with a price-to-earnings (P/E) ratio of 14 and a price-to-book (P/B) ratio of 1.5.
For comparison, the average stock in the S&P 500 trades with a P/E ratio of 21 and a P/B ratio of 3. KSA is about one-third less expensive than the S&P 500. It trades at half of the S&P 500’s P/B ratio.
Even though it’s cheap, KSA sold off on the news of the arrests. The ETF is about 9% off its recent highs.
But, Saudi Arabia is changing. Less than two months ago, the government said that women could drive starting next summer. This is a big change for the country.
Social change comes as the government is working to diversify the economy. There’s a plan to do that by 2030. Funding those plans is a lot easier with an extra $800 billion. That’s more than three years of government spending.
Profit From Change in Saudi Arabia
Saudi stocks and KSA moved in a narrow trading range this year. Sometimes, dramatic news pushes stocks out of the range. That’s what’s happening in Saudi Arabia.
News related to the arrests will provide a catalyst for the stock market. Each billion-dollar shakedown will push stocks higher.
Based solely on headlines, KSA sounds risky right now. But, big rewards come from the riskiest places. KSA could double from here, and it will happen quickly as the government makes billions from its detained princes.
Regards,
Michael Carr, CMT
Editor, Precision Profits
George Mast November 28, 2017
So your saying Saudi Arabia is making millions from detained criminals, and that is the reason to invest in the Saudi Arabian stock market, not to mention your statement of social change for women and the like????
It sounds very hopeful to me???? on your part.
First, they have laws that prohibit confiscation of ones assets, more so, those laws are in affect in such a enriched country, then even in the USA. An alternative thought is if one has wealth, and it is not distributed, (some of it out of government reach) so as to protect it would be supprisiing. If you think the USA is full of investment advisers visit the Saudi Arabian business place. Next are you going to tell us to take in laundry to make some money and we are we to believe you??
Second, Social injustice, is and always has been, there for some ethnics. A cosmetic shift to lighten those injustices make you think there will be Market Change in a country with the history of Social Injustice for THOUSANDS OF YEARS?? And you mention letting women drive as one of the points for this Market Change?
Like the Tuna Fish add once clamed: “Sorry Charley” Tell me the man behind the curtain is real?????? is that next
NT November 24, 2017
If you have been in Saudi Arabia, you will know that majority of their money is invested in OIL and in Cash, and not in stocks.
There are no triple digit opportunity. Life goes on and it will still be the same. OIL and cash
may be affected, but not Stocks.
It is a wrong information to state that “Arrests in Saudi Arabia Are a Triple-Digit Opportunity”.
It is better to know how Arabians think, which is not the same on how Americans think.
David R.(Canada) November 23, 2017
Rumour on the internet is that these men who have been arrested in Saudi Arabia are members of the world-wide paedophile ring that Trump and others are going after.
Does anyone else have any additional information about this ?
Will November 23, 2017
Not too sure that I would want to invest in a market where there has just been a “shakedown”!